The European Commission has published initial
orientations outlining the form of possible adjustments to the EU Single Market
framework for investment funds – the
UCITS[1]
Directive. The envisaged changes are needed in order to facilitate market-driven
restructuring and boost efficiency in the dynamic but fragmented European fund
market. The material published sets out initial suggestions on how to facilitate
cross-border marketing of funds; build scale and liquidity by supporting fund
mergers and asset pooling; allow fund managers to manage funds domiciled in
another Member State; simplify and improve product disclosures; and strengthen
supervisory cooperation mechanisms. These changes to the Directive were
announced in the Commission White Paper of November 2006 (IP/06/1569).
The consultation launched today seeks to mobilise regulatory, commercial and
user expertise to ensure the technical soundness of the Commission's subsequent
formal proposal. Deadline for comments is 15 June 2007. The Commission will
finalise its formal proposal end 2007.

Internal Market and Services Commissioner Charlie McCreevy said: "The
UCITS Directive has served the European fund industry well. It has been the
springboard for global leadership. But the industry is faced with massive
structural challenges – fragmentation, complex distribution channels,
competition from new investment products. The current Directive provides no
answer to these challenges. That is why I have pushed hard to strengthen the
Single Market framework for funds. The November White Paper agreed the steps
that were most urgently needed. This consultation marks the beginning of the
delivery phase. I invite stakeholders to comment critically on the usefulness,
coherence and cost-effectiveness of our preliminary ideas. This will ensure that
the Commission's subsequent proposal will really deliver better outcomes for
European investors and market participants."

The White Paper identified a series of changes to the UCITS Directive which
are urgently needed:

to remove costly administrative interference when harmonised funds are sold
cross-border;

to support consolidation of the fragmented fund industry through mergers and
asset pooling;

to allow fund managers to manage funds established in another Member
State;

to provide investors with meaningful and concise information about costs,
risks and potential rewards when deciding whether to invest in a
fund.

The Commission is now making public its initial views on how
best to realise these objectives. This material is published as a basis for
consultation and feedback from all interested parties. The Commission hopes to
receive extensive feedback and input from regulatory bodies, market participants
and other stakeholders on: their effectiveness in achieving the desired result;
their coherence with the overall UCITS framework and related legislation; the
likelihood of unintended consequences for stakeholders – particularly
investors; and cost-effectiveness.

The consultation is further expression of the Commission's commitment to
better regulation and transparent law-making. These are informal and preliminary
orientations: the Commission retains full discretion as regards the final form
of the proposal that it will subsequently table.

The following consultation documents are now available:

Overview of initial orientations for possible adjustments to UCITS
Directive: this presents the main objectives and guiding principles of the
envisaged solutions.

Detailed consultation material relating to the each set of envisaged
adjustments (notification procedure, fund mergers, asset pooling, management
company passport, simplified prospectus, supervisory cooperation): this includes
a more developed presentation of the shape of possible methods for realising the
desired improvements.

As part of the consultation process, the
Commission will host an open hearing in Brussels on 26 April 2007. This will
give stakeholders an opportunity to exchange views on the relevance and
effectiveness of the envisaged solutions.

The consultation documents plus online registration for the open hearing are
available at: